CH 7

Which of the following scenarios would be characteristic of an entrepreneur?

Rachel implemented a new and more efficient way to produce pottery.

Sara can be categorized under the late majority customer segment. Which of the following behaviors is she most likely to exhibit?

She will prefer to buy from well-established brands rather than unknown new ventures.

Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?

Unlike incumbent firms, new entrants do not have formal organizational structures and processes.

When firms innovate by leveraging existing technologies into new markets, they are said to be involved in

architectural innovations.

The demand for video recorders has drastically reduced, and there are only a few consumer electronics companies selling them at extremely low prices. Also, the current buyers of video recorders are mainly categorized under laggards. Which of the following stages of the industry life cycle is the video recorder industry in currently?

decline stage

When a firm pursues a harvest strategy, it

reduces investments in product support.

The key objective for firms during the growth phase is to

stake out a strong strategic position not easily imitated by rivals.

Which of the following statements is true of the early majority section of consumers?

They weigh the benefits and costs carefully when adopting a new product.

Researchers at Games First Inc. spent several months coming up with a fun game for toddlers that incorporates a new idea in preschool education. This scenario describes step _____ of the innovation process.

two

Which of the following is true of a disruptive innovation?

It targets existing markets.

In a radical innovation, a firm targets

new markets by using new technologies.

Which of the following statements is true of a disruptive innovation?

It invades the market from the bottom up, by first capturing the low end.

In the context of industrial growth, which of the following statements is true of standards?

As the size of a market expands, a standard signals the market's agreement on a common set of engineering features and design choices.

Which of the following is an open innovation principle?

External R&D can create significant value.

Which of the following is one of the reasons that led to CNN, an innovator, losing its leadership position in the 24-hour cable news industry?

The second movers imitated CNN's incremental innovation to continuously improve their offering.

Which of the following would be the result of product innovation?

an inexpensive, high-quality refrigerator

As the inventor of hypertension medication, OneSure Pharmaceuticals (OSP) Inc. was able to reap the benefits of economies of scale due to a large consumer demand for the drug. Even when competitors later developed similar drugs after the expiry of OSP's patents, regular users did not want to switch because they were concerned about possible side effects. Which of the following benefits does this scenario best illustrate?

first-mover advantages

NextDoor is an instant messaging application for smartphones. New smartphone users find it easier to connect with friends and relatives through this mobile app when compared to other similar instant messaging applications. Hence, it has the largest user base in the industry. Thus, NextDoor app's value has increased primarily due to its

network effects

Norce Autos Inc. allows its customers, suppliers, researchers, and the community in general to contribute their ideas toward new product developments. Customers and other interested stakeholders can let the company know what new features they want to see in their next car. If the company faces any technical complexities that its internal R&D team cannot solve, it posts the problem on its website and allows people from the external community to provide solutions. In this scenario, Norce Autos Inc. is primarily leveraging its

open innovation model.

The strategic objective of a first mover during the introduction stage of the industry life cycle is toThe strategic objective of a first mover during the introduction stage of the industry life cycle is to

pursue a harvest strategy.

Which of the following statements is strongly influenced by the not-invented-here syndrome?

If a product was not created and developed at our company, it could not be good enough.

Which of the following is an example of social entrepreneurship?

The committee approved the new formula for an all-purpose cleaner because it cleaned as well as other cleaners and used organic ingredients.

Which of the following reasons led to the launch of Procter & Gamble's "Connect + Develop," a web-based interface that connects the company's internal-innovation capability with the distributed knowledge in the global community?

The company was no longer able to generate adequate growth through closed innovation.

Globe Source Inc. is a consumer electronics company that follows an open innovation model. Which of the following can be concluded about this firm?

The firm will buy others' intellectual property whenever it advances its own business model.

Which of the following is a competitive benefit experienced by the first mover firm in an industry?

The first mover will be able to reduce costs through economies of scale.

Which of the following is a drawback of using the industry life cycle as a framework to guide strategic choice?

The framework does not explain everything about changes in industries.

Which of the following is a feature of the maturity stage of the industry life cycle?

The market reaches its maximum size.

Which of the following statements accurately brings out the difference between closed innovation and open innovation?

While open innovation focuses on building an effective business model to commercialize R&D, closed innovation focuses on being first to market.

While the industry for 3-D televisions is in the introduction stage of the industry life cycle, the CRT (cathode ray tube) television industry is in its decline stage. Which of the following statements will be true in this scenario?

While product innovation will be at its maximum for the 3-D television industry, process innovation will be more crucial for the CRT television industry.

Which of the following scenarios would typically happen in a firm that uses open innovation?

a meeting with professors at a university to get ideas for product

Process innovation is more important than product innovation during the growth stage because

a standard, in terms of engineering features and design choices, has been set across the industry.

A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones is called

absorptive capacity.

DigitalHealth Electronics Inc. is a company that builds diagnostic devices. It was the first company to develop a compact MRI scanner by reconfiguring the components of the MRI technology. This smaller and user-friendly version of the huge MRI scanner created demand from small hospitals, nursing homes, and private practice doctors who were earlier dependent on the scanning machines in large hospitals. Which of the following types of innovations does this scenario best illustrate?

architectural innovation

The increasing availability of external options to commercialize ideas that were previously shelved is one of the factors that led to the shift from the

closed innovation to open innovation.

When the market for photo film negatives declined with the arrival of digital cameras, Momento Films Inc., a manufacturer of film negatives, bought out most of its rivals that were planning to exit. This allowed the company to get rid of all the excess capacity and acquire a monopolistic market power in the declining industry. Which of the following strategies has Momento Films adopted in this scenario?

consolidated strategy

When a firm pursues a maintain strategy, it

continues to support marketing efforts even if the demand for the product is declining.

The customers entering the market in the growth stage are primarily

early adopters.

It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they

enter into the market in large numbers, creating a herding effect.

To be successful and to survive the shakeout stage of the industry life cycle, a firm should

gain economies of scale.

In which of the following stages of the industry life cycle is a standard first established?

growth stage

In the decline stage, which of the following strategies involves a reduction of investments in product support?

harvest strategy

Large companies, such as AT&T, IBM, and GE, have been shifting their knowledge landscape from closed innovation to open innovation because of the

increasing supply and mobility of skilled workers.

SyncTouch Inc. is a manufacturer of cell phones. It has released an improvised version of its smartphone in markets in which the company already operates. Which of the following types of innovations does this scenario best illustrate?

incremental innovation

A factor favoring the success of disruptive innovation is that

incumbent firms are slow to change.

While the personal computer industry is flooded and growing with laptops and tablets, Ivan recently bought a desktop, his first personal computer. He realized that a computer at home would be helpful for his children for their school projects, and he could use it to maintain the simple accounts of his plumbing business. Which of the following customer segments does Ivan best represent?

laggards

Incumbent firms favor incremental innovation over radical innovation because

radical innovation will disturb the existing power distribution within the firms.

EasyOpen Inc. has entered a stage in which the demand for their innovative electric can openers has declined. Now most customers are buying replacement parts or buying their second can opener from the firm. What stage in the industry life cycle does this scenario describe?

shakeout stage

How is the early majority section of consumers different from the late majority section?

Although the early majority is confident in their ability to master a new technology, the late majority is not.

Which of the following statements is true of firms pursuing a closed innovation?

Firms in the closed innovation model are extremely protective of their intellectual property.

Which of the following is a feature of the growth stage of the industry life cycle?

The consumer demand increases.

While the industry for e-book readers is in its growth stage, the industry for landline telephones is in the decline stage of the industry life cycle. Which of the following can be inferred from this?

The number of competitors in the e-book reader industry will be larger when compared to the landline telephone industry.

While the domestic airline industry is in the maturity stage of the industry life cycle, the pet clothing industry is in its growth stage. Which of the following can be inferred from the given data?

While the domestic airline industry is free from excess capacity, the pet clothing industry will have new entrants.

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes

architectural innovation.

As a start-up company, Virtue Mobiles Inc. entered the low end of the highly competitive cell phone industry with its low-cost smartphones. Initially, the company was able to sell its inferior technology due to its low prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartphones in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate?

disruptive innovation

Futura Inc. introduced an automobile that could run completely on electricity for longer periods of time than any other electronic or hybrid automobile. Also, this vehicle was less expensive than the vehicles of competitors. On the downside, it required more repairs than the competition's automobiles. However, the technology of the Futura vehicle improved rapidly, thereby improving its repair record. This example describes

disruptive innovation.

At the time when Kevin decided to purchase a tablet computer, the product had just become accessible to the mass market. He purchased the tablet only after he was completely convinced that the benefits it would offer him would far exceed its price. Also, he waited for his friends to try the product and popular gadget television shows to endorse it. Which of the following customer segments does Kevin best represent?

early majority

The leading producer of gardening tools, YourGarden Inc, has achieved great success because they produce high-quality tools that are not too expensive. Even so, another company that produces lower-quality tools at the same price has also achieved some success, but not as much as YourGarden. Also, in general, the price of gardening tools has declined because of economies of scale and learning. In addition, YourGarden has added complementary assets, such as gardening instruction. Considering all of these factors, the gardening tool industry is most likely in the

growth stage.

Intel's Celeron chip and Atom chip are initiatives to

guard the company against disruptive innovation by protecting the low end of the market.

Although TechnoWare Electronics Inc. still sells its VCR players, a product in its decline stage, the investments made by the company on improving or marketing the product are very low. The company has allocated the least amount of human and financial capital to this department. Which of the following strategies has TechnoWare Electronics adopted in this scenario?

harvest strategy

In emerging economies, the LCD television industry is in that phase of the industry life cycle in which the previously increasing market demand becomes limited. The competitive intensity within the industry is high, and inefficient firms have begun to exit the industry. This has allowed only a few major companies to come out as cost-leaders and hold the shrinking market. Which of the following stages of the industry life cycle is the LCD television industry currently in?

shakeout stage

Georgia Ray is the founder of the departmental stores chain, Ether Inc. She ensures that the products in her stores are ethically and responsibly sourced. Most products are therefore 100 percent organic and manufactured from recycled material. Also, her company purchases handicrafts from nonprofit organizations supporting the aged. Georgia's belief is that her company should be able to support the community at large. Which of the following terms best describes Georgia Ray?

social entrepreneur

The strategic objective of businesses during the shakeout phase of the industry life cycle will primarily be to

survive by drawing on "deep pockets."

Which of the following customer segments as described in the chasm framework make up the mass market?

the early and late majority together

The market for 3-D televisions is in the introduction stage of the industry life cycle. What does this imply?

There are only a few competitors in the 3-D television market.

Which of the following statements accurately brings out the distinction between the introduction and growth stages of the industry life cycle?

There is more strategic variety in the growth stage when compared to the introduction stage.

While cell phones with holographic keyboards are currently in the introduction stage of the industry life cycle, tablet computers are in the growth stage. In the context of this scenario, which of the following statements is true?

While the industry for cell phones with holographic keyboards will focus on product innovation, the tablet industry will focus on process innovation.

Which of the following is a feature of the shakeout phase of the industry life cycle?

Competitive intensity within the industry increases.

Which of the following key assumptions are innovations like Procter & Gamble's "Connect + Develop" based on?

Combining the best of internal and external R&D will more likely lead to a competitive advantage.

Which of the following most accurately describes a difference between incremental innovation and radical innovation?

Incremental innovation builds on an established knowledge base; radical innovation uses an entirely different knowledge base.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

The compact disk (CD) industry is in the maturity phase of its industry life cycle. What conditions prevail for an industry in this stage?

The industry structure is an oligopoly with only a few large firms.

Which of the conditions prevail when an industry is at the end of its life cycle?

The level of process innovation reaches its maximum as firms attempt to lower cost.

Why is the phase after the growth stage of the industry life cycle referred to as the shakeout stage?

The weaker firms are forced out of the industry in this stage.

Which of the following statements accurately brings out the difference between technology enthusiasts and early adopters?

Unlike technology enthusiasts, early adopters' demand is fueled more by intuition and vision rather than technology concerns.

When does a firm fall into the large competitive chasm between early adopters and early majority?

when it fails to successfully launch a mass-market version of its product